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Session 2000-01
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Delegated Legislation Committee Debates

Draft Financial Investigations (Northern Ireland) Order 2001

Fifth Standing Committee on Delegated Legislation

Monday 30 April 2001

[Mr. Roger Gale in the Chair]

Draft Financial Investigations

(Northern Ireland) Order 2001

4.30 pm

The Minister of State, Northern Ireland Office (Mr. Adam Ingram): I beg to move:

    That the Committee has considered the draft Financial Investigations (Northern Ireland) Order 2001.

The proposal is another important measure in the Government's strategy to meet the threat from organised and serious crime. As the Prime Minister said, everyone in Northern Ireland deserves to share in the benefits of peace. The mafia-like activities of a minority are preventing some local communities from making the transition to a normal society. That is why criminals must be denied the opportunity to profit from the misery of others.

Organised crime is a threat to the fabric of society. It thrives on extortion, fear and violence. I pay tribute to the great successes of the police and Customs and Excise in tackling organised crime during the past 12 months. Indeed, last Friday the Royal Ulster Constabulary announced another significant recovery of illegal drugs. I have previously outlined to the House police successes against counterfeit goods, and action by Customs and Excise against fuel and tobacco smuggling.

Despite those achievements, the threat assessment recently published by the organised crime taskforce, which I chair, makes it clear that this will be a long struggle, demanding constant innovation and development by the law enforcement agencies and the Government. The measure is one example of that flexible response to an ever-changing criminal threat.

The documents recently published by the taskforce set out for the first time the scale of the threat in Northern Ireland. Some 78 groups, involving some 400 individuals, have been identified in Northern Ireland as meeting the definition of organised crime. More than half the groups known to the police are either associated with, or controlled by, loyalist or republican paramilitary organisations. Some important local criminals derive their influence and status directly from their current or past paramilitary links. A central feature of most organised crime activity is money laundering. The threat assessment shows that nearly three quarters of the groups involved in money laundering are also involved in drug trafficking or dealing. The taskforce recognises that organised crime is a multi-faceted problem, which demands different answers from different agencies, working closely together.

The background to the proposal is the setting up of the taskforce to examine the problem. As a result of that analysis, we have now set out, for the first time, the first annual strategy for confronting the threat that I have outlined. Its strategic priorities for this year include targeting money-laundering activities and seizing the proceeds of crime.

In seeking to achieve those objectives we must face some hard truths: criminals adapt their methods in response to advances made by the authorities. Many organised crime gangs are ruthless and cunning. They look for new ways of preying on society, of avoiding detection and of concealing their illegal gains. The Government must respond to those new challenges by improving our means of detecting crime and confiscating the proceeds. By recovering the proceeds of crime, we drain away the financial lifeblood of criminals. We make it harder for organised criminals to commit further crime and to sustain themselves through financing new operations, and we deter others from embarking on criminal initiatives. Equally, by recovering the proceeds of crime, we provide reassurance to ordinary people who no longer see criminals flaunting their ill-gotten wealth. The money recovered by such means can be used for the benefit of the whole community.

Public consultation is taking place on the draft Proceeds of Crime Bill, announced by the Home Secretary on 5 March. The draft Bill, which extends to the whole of the United Kingdom, contains measures to improve the recovery of illegally obtained assets. It outlines plans to set up a criminal assets recovery agency with powers to investigate and recover property believed to be the proceeds of crime, including new powers to tax assets derived from criminal conduct and civil recovery of illegally obtained assets. The new agency will have a senior official with special responsibility for Northern Ireland. It will be able to co-operate fully with other enforcement bodies in Northern Ireland, and to take into account the unique circumstances of Northern Ireland, including the presence of a land border and the legacy of paramilitarism.

Another element in our strategy to pursue the proceeds of crime in Northern Ireland is the draft financial investigations order being considered today. It amends the main legislation that tackles criminal finance in Northern Ireland—the Proceeds of Crime Order 1996. A key provision of that order was the introduction of powers for the appointment of a financial investigator to assist the police in carrying out investigations into the proceeds of crime. The extensive powers of financial investigators are set out in schedule 2 to that order, and include the power to issue a general bank circular for the purpose of identifying accounts held by named individuals.

The powers in the 1996 order are in addition to the normal powers of investigation available to the police. They are used only in selected cases, and only following a determination of a county court judge that the appointment of a financial investigator could substantially enhance the investigation. Experience of operating the legislation has shown that it has worked well. Between August 1996 and December 2000, financial investigators were appointed in 28 cases. During that period, 23 general bank circulars were issued, resulting in the identification of more than 1,200 previously unknown accounts in Northern Ireland, connected with people under investigation. However, experience has also shown that parts of the 1996 order need to be adjusted and strengthened. The draft order before the Committee contains several practical proposals for improvement that have resulted from discussions with and between law enforcement agencies in Northern Ireland.

There are five main provisions to the order. Article 3 enables Customs and Excise officers to apply for the appointment of a financial investigator to assist them with investigations into the proceeds of crime. That power is currently available only to the police. The provision also permits court-authorised Customs officers, like their police counterparts, to issue general circulars to financial institutions and solicitors. Article 4 provides financial investigators with the same powers of access to material under a production order as are currently available to the police. Article 5 extends the range of institutions to which a general bank circular may be issued, so as to include a wider range of financial institutions.

As I have already said, a general bank circular may be issued to banks requiring them to identify accounts held by a named person. At present the issue of such a circular is restricted to those institutions involved in ``banking'' in the narrow sense: that is, banks and building societies. However, we recognise that there is a trend in money laundering away from using banks and building societies towards greater use of securities, futures, options and insurance markets. Article 5 is therefore designed to meet that threat. It provides that in future such circulars may be issued to institutions providing a much wider range of financial and insurance services—services subject to the Money Laundering Regulations 1993. Those include investment firms, insurance companies and other institutions in the regulated financial sector.

Article 6 creates the power to issue a general solicitor circular, which is an entirely new means of helping investigators to establish the beginnings of an audit trail in search of the proceeds of crime. In future, investigators will be able to issue a circular to all or any firms of solicitors asking them to indicate whether they have acted for a named client in respect of certain matters, relating mostly to property and assets.

When a person is identified as a client, the solicitor will be obliged to provide limited information about him, including the nature of the transaction in which the solicitor acted—particularly whether the transaction involved land, a business and so forth. The power will be particularly helpful in tracing land transactions in the unique circumstances of Northern Ireland.

Not only are there currently two systems for the registration of land in Northern Ireland, but the registration of title is not generally compulsory. Moreover, any inquiry regarding ownership of land can be made by reference only to the property, not the owner.

Article 7 introduces an exception to the standard period—presently six months after the offence was committed—within which a prosecution of a summary offence should be brought. The exception relates to summary proceedings for the offence of failing to provide information or falsifying it. For such proceedings, the time limit for prosecutions will be three months from the date on which sufficient evidence to prosecute becomes available, or 12 months from the commission of the offence, whichever is the later. Additional latitude may be needed if the financial crime was committed some time before it was detected—for example, through the examination of accounts.

I should now like to comment on the consultation process and set out the background to the order and the rationale for it. The proposal was laid before Parliament on 21 November last year and we invited the Northern Ireland Assembly to consider it. We also took the opportunity to copy it for comment to organisations with an interest in this policy area.

The proposal was debated on 22 March by the Northern Ireland Grand Committee. A statement summarising responses to the proposal, and a further statement of the changes made as a result of them, has been laid before Parliament along with the draft order. The proposal was received with broad approval—a majority of the Assembly supported it, and debate by the Grand Committee was favourably disposed to the proposed measures.

Several concerns were expressed by some members of the Assembly and by certain organisations. Some raised questions about the civil liberties of people who may be affected by the new powers, whether innocently or otherwise. Others had concerns about the potential implications of the order for the confidentiality of the solicitor-client relationship and for legal professional privilege.

The Government believe that the draft order is compatible with the European convention on human rights. We acknowledge that powers available to the authorities to pursue the proceeds of crime are already far-reaching. The draft order augments those powers, so we must be sure that the new measures are necessary, but no more than necessary, to meet the challenge posed by serious criminals. That is why, when we presented our original proposals last November, we ensured that appropriate safeguards were in place to protect individuals.

I shall provide a few examples. The powers will continue to apply only to investigations into the proceeds of serious crime. The police—and, in future, Customs and Excise—will have to persuade a county court judge that the use of the special investigatory powers is justified in each case.


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